Temporary Franchise Closure: A Contingency Plan

When developing an existing business into a franchise network, describing a typical working day is not enough. You also need to answer the question of what happens when an outlet suddenly cannot operate. A flood, a prolonged IT outage or damage to essential equipment can halt sales while rent, orders and other commitments remain. Before launching your first franchise, draw up a workable plan for temporary closure and restarting operations.

1. Define incidents and thresholds for action

The plan should be more than a general instruction telling franchisees to call head office if something goes wrong. Start by listing the incidents that could bring your particular business to a halt. For a food service outlet, refrigeration failure may be critical; for a service business, it might be an unavailable booking system; for a shop, damage to the premises or loss of access.

For each incident, define three things:

• Immediate safety action: what the outlet manager must stop, protect or check straight away.
• Notification threshold: when the problem can be handled locally and when the franchisor must be notified.
• Alternative operating arrangements: which activities may continue and under what conditions.

Do not set the same time threshold for every incident. A suspected risk to people requires immediate action, whereas a brief outage affecting a non-essential application calls for a different response. Alternative procedures must never bypass safety rules, data protection requirements or the requirements governing your business activity.

Also distinguish between a problem affecting one outlet and a network-wide outage. If a central software system fails, coordination should normally be led by whoever manages it, rather than by each franchisee separately.

2. Address the consequences of interruption in the contract

Slovenia has no dedicated law comprehensively governing franchise agreements, nor a specific statutory list of pre-contractual disclosures for franchises. Contractual relationships are governed primarily by the Slovenian Obligations Code (OZ). Freedom of contract is limited by the constitution, mandatory legislation and moral principles; depending on the incident, sector-specific rules also apply.

Temporary closure does not, in itself, bring all contractual obligations to an end. The Obligations Code contains rules on liability for non-performance, impossibility of performance and changed circumstances, but these have different conditions and consequences. Nor does describing an event as ‘force majeure’ automatically determine who bears a particular cost.

Work with a legal adviser to define how incidents must be reported, what supporting evidence is required, the duty to mitigate loss and the consequences of a prolonged interruption. Distinguish between an event beyond the parties’ control and an interruption caused by neglected maintenance or failure to meet agreed obligations.

Make specific provision for ongoing franchise fees. A turnover-based fee and a fixed monthly fee do not work in the same way during a closure. Set out whether payment can be deferred, reduced or temporarily waived, who makes that decision and how the agreement is confirmed. Similarly, review the costs of central software and other services that remain active.

3. Allocate responsibilities and ensure access to instructions

During an emergency, there is no time to guess who can authorise an urgent repair or notify customers. Prepare a short list of responsibilities covering the outlet manager, the franchisee, the franchisor’s designated contact and external contractors.

The franchisee should have clear authority to take urgent local action within the scope of their obligations. The franchisor should specify who coordinates network-wide communications, checks that central systems are working and helps restart operations. If you plan to have someone stand in for the person responsible, that deputy must have the necessary authority, knowledge and access.

The operational plan should include:

• contact details and arrangements for reaching responsible staff outside normal working hours;
• procedures for securing the premises, equipment and business records;
• rules for handling orders and bookings already accepted;
• a method for recording the incident, decisions and costs incurred;
• conditions for reopening safely.

Keep essential instructions in a format that remains accessible if the central system goes down. At the same time, restrict access to sensitive information. Slovenia’s Trade Secrets Act (ZPosS) is relevant to trade secrets, while personal data is governed by the General Data Protection Regulation and Slovenia’s Personal Data Protection Act (ZVOP-2). An emergency does not justify uncontrolled copying of customer lists onto personal devices.

4. Test the plan before bringing in your first partner

Run a tabletop exercise at an existing outlet: assume that a critical system is unavailable and the person responsible is absent. Without compromising safety in practice, ask the team to demonstrate where they would find instructions, whom they would notify and how they would handle outstanding orders.

Record ambiguities, not just response times. If two people are each waiting for the other to make a decision, authority has not been defined clearly enough. If the backup contact details are stored only in an inaccessible application, the plan does not work in practice.

Review insurance cover as well. Business interruption cover is not automatic, and its scope depends on the policy, insured risks, exclusions and other terms. Do not promise a partner compensation for lost revenue without checking the specific cover in place.

Practical takeaway: before your first expansion, prepare a short response plan, address the financial consequences in the contract and run one exercise. A franchise network is better prepared when every partner knows what to do, even when normal business operations are impossible.